Top economist Mohamed El-Erian says crypto is a canary in the coal mine for an era of ‘irresponsible risk taking’—and the fallout could lead to ‘financial accidents’

Key Facts

The downturn was only compounded by the collapse of the world’s second largest crypto exchange, FTX, which went bust last month, leading to accusations that its former CEO was running a “Ponzi scheme”—which he has denied.
“What if the irresponsible risk-taking that we see in crypto was also taking place elsewhere…and that crypto simply happened to be the structurally most fragile of those cases?” he asked New York Times reporter Ezra Klein in a Friday interview.
El-Erian believes that crypto’s dark days aren’t yet a “systemic” risk to the financial system or the broader economy, but says there are signs of distress everywhere including the near-collapse of the U.K. gilt market and emerging market debt crises in places like Sri Lanka.
The economist, who once served as the CEO of Pimco, said that after the Great Financial Crisis of 2008, the banking system was strictly regulated, but that risk in the entire financial system didn’t just disappear.